This paper describes a simple method for the calculation of second-order solutions to dynamic general equilibrium models. The method relies on standard linear solution procedures and does not require any new numerical algorithm. As an illustration, the method is used to derive a full...

This paper considers the implications of incomplete exchange rate pass-through for optimal monetary and exchange rate policy. A two-country model is presented which allows an explicit derivation of welfare functions in terms of a weighted sum of the second moments of producer prices and the...